Business letters: November 14

Vat is hampering business, a baker looks to expand but realises rents are too much dough while red tape means one small business refuses to recruit

Vat is destroying my business

George Osborne and David Cameron need to understand how Vat destroys small
business growth (“How to set small business free”, last week).

Here I am, dismantling scrap cars to sell the parts and restoring classic
cars. I have one employee. My Vat-taxable inputs are minimal. Premises, rent
and that’s about it. Vendors of scrap cars are not Vatregistered. My
employee is not Vat-registered. So the bulk of my costs have negligible Vat
to offset against the output tax I must charge.

As from next year, if and when my outputs reach £70,000, I must charge Vat.
That’s £14,000, against which I can offset input tax of maybe £4,000. That’s
£10,000 I suddenly have to find.

I might be able to increase prices slightly without suffering a loss of sales
but the reality is that the bulk of that £10,000 must come from existing
turnover.